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ETFs – the New(ish) Financing Paradigm: When I was approached to write an update to the piece I The London Stock Exchange is reporting a 50 per cent
($1.28 trillion by the end of 2020¹) volumes have exploded.
wrote on ETFs three years’ ago, I was intrigued to learn just
An Update for 2021 understand what had remained the same. Whilst there increase for 2020², demonstrating that ETFs are firmly
how much had changed over the period and conversely
becoming the Institutional vehicle of choice. Consequently,
is no doubting the incredible impact ETFs have had over the traditionally dominant players in the securities lending
the last decade, with AuM doubling over the last five marketplace (i.e. the largest Beneficial Owners) are
Andrew Jamieson years alone, they have always been peripheral within unquestionably holding more and more of these products
Managing Director, Global Head of ETF Product, Citi the confines of Securities Financing in Europe. Either in as ETF adoption continues apace.
terms of lending to harness increased yield, borrowing to
facilitate short coverage or indeed financing & collateral But are we seeing that translate into increased lending
pledging to fulfil other obligations. volumes? In simple terms, yes as the table below (courtesy
of IHS Markit) shows. In the last three years, we have
Three years ago I predicted that was about to change: witnessed an increase in visible availability in Europe of
that Europe would emulate the more mature US-market nearly 40% from just under $50 billion then to almost $70
and ETFs were set to play a more mainstream role on the billion now.
European stage, but was that correct? Sadly, the answer
is not clear-cut - both yes & no would be a fair reflection. Similarly on loan balances, whilst more volatile, have
Therefore, we need to take a more granular look at what increased from around $4 billion to over $5.2 billion
has changed for the positive, and where there is still work (+30%) and peaked as high as $8.5 billion during the initial
to do. Covid ‘fallout’ illustrating the increasing adoption of ETFs
as a macro hedging tool in addition to a core long holding.
Growth Phenomena

With global AuM over $7 trillion, and Europe comfortably
smashing through the $1 trillion mark for the first time ¹Source: Citi ETF Research
²Source: London Stock Exchange
Fig 6: Availability and Value on Loan Source: IHS Markit

100B 10B

80B 10B

60B 6B
Availability Value on Loan

40B 4B

20B 2B

0 0
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